Eyman: Why doesn’t income tax initiative reduce sales tax?

Tim Eyman, the prolific sponsor of tax-limiting initiatives, says a proposed measure to impose an income tax on rich people would leave in place the levy that most hurts the poor – the state sales tax.

Eyman says the backers of Initiative 1077 complain about the regressive nature of Washington’s taxes (one study calls our state’s tax system the most regressive in the country). But Eyman said I-1077 would do nothing about the most regressive of all levies – the sales tax.

“Their initiative doesn’t lower the sales tax one penny,” Eyman said Wednesday of Initiative 1077. “There’s a little reduction in the property tax and a little reduction in the taxes businesses pay.”

I-1077 would tax couples with adjusted gross incomes greater than $400,000 annually, or incomes of more than $200,000 for individuals. Supporters say that represents the top 3 percent of earners in Washington. It also would cut the state property tax by 20 percent and increase the business-and-occupation tax credit to $4,800. The proposed initiative sets out two tax brackets. The first tax rate would be 5 percent of the portion of joint income that exceeds $400,000, or $200,000 for individuals. The tax would increase to 9 percent on the portion of income that exceeds $1 million for couples or $500,000 for individuals.

Eyman, who attended Wednesday’s I-1077 kickoff news conference, said the measure would do little to change the tax system supporters say they dislike.

The current state sales tax rate is 6.5 percent. According to the Office of Financial Management, more than 51 percent of state tax revenue ($15.3 billion) is expected to come from the sales tax during this two-year budget period.

“When given the chance to do an initiative that actually lowers the sales tax, they didn’t do it,” Eyman said. “The reason is, sales tax generates gobs of money.”

Eyman did predict that I-1077 would qualify for the November ballot and turn the election system into a referendum on taxation.

“It’s what everyone is going to be talking about. When Bill Gates Sr. said, ‘This is really an exciting day.’ It is, on both sides.”